NAVOTAS POLYTECHNIC COLLEGE

Bangus St., Corner Apahap St., NBBS, City of Navotas

BUSINESS LAW

Module 3- KINDS OF OBLIGATION

Intended Learning Outcomes (ILO)

By the end of the module, the students are expected to:

1. Differentiate content from subject.

2. Identify the nature and classification of c1. To be familiarized with legal principles relating to
obligations and contracts by exposing them to relevant primary and secondary materials and
discussions on actual and hypothetical cases.
3. To be able to examine facts of a given case, find relevant facts and key issues, identify and apply
the legal rules and principles involved, and generate appropriate responses to situation involving
the application on laws on obligations and contracts and various aspects thereof
4. Differentiate content from subject.
5. To be familiarized with legal principles relating to obligations and contracts by exposing them to
relevant primary and secondary materials and discussions on actual and hypothetical cases.

Lecture Proper and Discussion

SECTION 1. - Pure and Conditional Obligations Art. 1179.

Every obligation whose performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once. Every obligation which contains a resolutory
condition shall also be demandable, without prejudice to the effects of the happening of the event. (1113)
Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall
be deemed to be one with a period, subject to the provisions of Article 1197. (n)
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the condition.
(1114)

1 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional
obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall
take effect in conformity with the provisions of this Code. (1115)
Art. 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by
law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof
which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an
impossible thing shall be considered as not having been agreed upon. (1116a)
Art. 1184. The condition that some event happen at a determinate time shall extinguish the obligation as
soon as the time expires or if it has become indubitable that the event will not take place. (1117)
Art. 1185. The condition that some event will not happen at a determinate time shall render the
obligation effective from the moment the time indicated has elapsed, or if it has become evident that the
event cannot occur. If no time has been fixed, the condition shall be deemed fulfilled at such time as may
have probably been contemplated, bearing in mind the nature of the obligation. (1118)
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
(1119)
Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes
reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall
be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall
appropriate the fruits and interests received, unless from the nature and circumstances of the obligation
it should be inferred that the intention of the person constituting the same was different. In obligations to
do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has
been complied with. (1120)
Art. 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the
preservation of his right. The debtor may recover what during the same time he has paid by mistake in
case of a suspensive condition. (1121a)
Art. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration
of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood
that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the
creditor;

2 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary. (1122)
Art. 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the
parties, upon the fulfillment of said conditions, shall return to each other what they have received. In case
of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor,
are laid down in the preceding article shall be applied to the party who is bound to return. As for the
obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed
as regards the effect of the extinguishment of the obligation. (1123)
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court
shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is
understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law. (1124)
Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated
the contract, the same shall be deemed extinguished, and each shall bear his own damages. (n) SECTION
2. - Obligations with a Period
Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when
that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the
day certain. A day certain is understood to be that which must necessarily come, although it may not be
known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional,
and it shall be regulated by the rules of the preceding Section. (1125a)
Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain,
the rules in Article 1189 shall be observed. (n)
Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the
period or believing that the obligation has become due and demandable, may be recovered, with the
fruits and interests. (1126a)
Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for
the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances
it should appear that the period has been established in favor of one or of the other. (1127)

3 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the
duration of the period when it depends upon the will of the debtor. In every case, the courts shall
determine such period as may under the circumstances have been probably contemplated by the parties.
Once fixed by the courts, the period cannot be changed by them. (1128a)
Art. 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or
security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and
when through a fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the
period;
(5) When the debtor attempts to abscond. (1129a) SECTION 3. - Alternative Obligations
Art. 1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)
Art. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could
not have been the object of the obligation. (1132)
Art. 1201. The choice shall produce no effect except from the time it has been communicated. (1133)
Art. 1202. The debtor shall lose the right of choice when among the prestations whereby he is
alternatively bound, only one is practicable. (1134)
Art. 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the
obligation, the latter may rescind the contract with damages. (n)
Art. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor,
all the things which are alternatively the object of the obligation have been lost, or the compliance of the
obligation has become impossible. The indemnity shall be fixed taking as a basis the value of the last thing
which disappeared, or that of the service which last became impossible. Damages other than the value of
the last thing or service may also be awarded. (1135a)
Art. 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be
alternative from the day when the selection has been communicated to the debtor. Until then the
responsibility of the debtor shall be governed by the following rules:

4 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that
which the creditor should choose from among the remainder, or that which remains if only one subsists;
(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of
those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right
to damages;
(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the
price of any one of them, also with indemnity for damages. The same rules shall be applied to obligations
to do or not to do in case one, some or all of the prestations should become impossible. (1136a)
Art. 1206. When only one prestation has been agreed upon, but the obligor may render another in
substitution, the obligation is called facultative. The loss or deterioration of the thing intended as a
substitute, through the negligence of the obligor, does not render him liable. But once the substitution has
been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud.
(n) SECTION 4. - Joint and Solidary Obligations
Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same
obligation does not imply that each one of the former has a right to demand, or that each one of the latter
is bound to render, entire compliance with the prestation. There is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (1137a)
Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article
refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many
shares as there are creditors or debtors, the credits or debts being considered distinct from one another,
subject to the Rules of Court governing the multiplicity of suits. (1138a)
Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective
acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be
insolvent, the others shall not be liable for his share. (1139)
Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility. (n)
Art. 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same
manner and by the same periods and conditions. (1140)
Art. 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not
anything which may be prejudicial to the latter. (1141a)
Art. 1213. A solidary creditor cannot assign his rights without the consent of the others. (n)
Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or
extrajudicial, has been made by one of them, payment should be made to him. (1142a)
Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary
creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the
provisions of Article 1219. The creditor who may have executed any of these acts, as well as he who

5 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

collects the debt, shall be liable to the others for the share in the obligation corresponding to them.
(1143)
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected. (1144a)
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more
solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment
may claim from his co-debtors only the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the debt is due, no interest for the intervening
period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse
his share to the debtor paying the obligation, such share shall be borne by all his codebtors, in proportion
to the debt of each. (1145a)
Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if
such payment is made after the obligation has prescribed or become illegal. (n) Art. 1219. The remission
made by the creditor of the share which affects one of the solidary debtors does not release the latter
from his responsibility towards the codebtors, in case the debt had been totally paid by anyone of them
before the remission was effected. (1146a)
Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle
him to reimbursement from his co-debtors. (n)
Art. 1221. If the thing has been lost or if the prestation has become impossible without the fault of the
solidary debtors, the obligation shall be extinguished. If there was fault on the part of any one of them, all
shall be responsible to the creditor, for the price and the payment of damages and interest, without
prejudice to their action against the guilty or negligent debtor. If through a fortuitous event, the thing is
lost or the performance has become impossible after one of the solidary debtors has incurred in delay
through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding
paragraph shall apply. (1147a)
Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are
derived from the nature of the obligation and of those which are personal to him, or pertain to his own
share. With respect to those which personally belong to the others, he may avail himself thereof only as
regards that part of the debt for which the latter are responsible. (1148a) SECTION 5. - Divisible and
Indivisible Obligations
Art. 1223. The divisibility or indivisibility of the things that are the object of obligations in which there is
only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title.
(1149)
Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing
or of the value of the service in which the obligation consists. (1150)
6 Prof. Dominador G. Benas, Jr
Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

Art. 1225. For the purposes of the preceding articles, obligations to give definite things and those which
are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for
its object the execution of a certain number of days of work, the accomplishment of work by metrical
units, or analogous things which by their nature are susceptible of partial performance, it shall be
divisible. However, even though the object or service may be physically divisible, an obligation is
indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or
indivisibility shall be determined by the character of the prestation in each particular case. (1151a)
SECTION 6. - Obligations with a Penal Clause
Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and
the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of
this Code. (1152a)
Art. 1227. The debtor cannot exempt himself from the performance of the obligation by paying the
penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor
demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this
right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of
the obligation, the performance thereof should become impossible without his fault, the penalty may be
enforced. (1153a)
Art. 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may
be demanded. (n)
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable. (1154a)
Art. 1230. The nullity of the penal clause does not carry with it that of the principal obligation. The nullity
of the principal obligation carries with it that of the penal clause. (1155)

7 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS

Suggested Activities (SAs)

 Brainstorming
 Inductive Reasoning
 Presentations ( Video and slideshare)
 Q & A (Students pose questions)

Assessment Tasks / Output (ATOs)

 Answering prepared questions

 Group Activity through Google Classroom
 Presentation via Zoom or Google Meet

Readings and Other References

➢ REPUBLIC ACT NO. 386 AN ACT TO ORDAIN AND INSTITUTE THE CIVIL CODE OF THE PHILIPPINES
➢ Notes in Business Law, Soriano, (2016) edition

8 Prof. Dominador G. Benas, Jr

Prof.Reynita C. Balilu
Prof Fatty Morales-Niog
Prof.Pastora Haber Ursal
Prof.Edward Sinnung

COMPILATION OF INSTRUCTIONAL MATERIALS